Douthwaite-Darley (January 2003)

Q1. What are the pre-conditions for community currency?

The preconditions for a community currency to work . . . First of all it has
to be needed. People will always prefer to use the national currency if it’s
easily available. So you find that community currencies are, in fact, counter-cyclical.
So when people find that they have a shortage of the national currency and time
on their hands, that they can’t sell on the market, then they become interested
in a community currency system.

Q2. What are the Main Problems with the Present Money System?

Most people don’t realize that we are using a particular sort of money
at the moment. We are using a debt-based money. That is, virtually all free
money that is used in industrialized countries at the moment only exists because
somebody has borrowed it. So, for example, if you have paid off all your debts,
you don’t owe anything on your house or your car, you don’t owe
anything to the bank and you’ve got a positive bank balance, then you
have money because someone somewhere has borrowed that money and he’s
paying interest on it.

It’s only the notes and coins that we use that we use that in fact are
not debt-based. These are becoming a smaller and smaller part of the money system
because we use credit cards, debit cards, cheques, automatic bank transfers
these days. So a lot of money is becoming electronic. It’s a book entry,
an entry on a computer. And that money is all debt-based. The real snag with
that sort of money is that if people lose confidence and don’t want to
borrow, and so the rate at which they’re borrowing from the bank this
year is below last year, then last year’s loans and the previous year’s
loans are going to be steadily paid off and the money supply will shrink.

Now this means that it becomes very much more difficult to trade. The business
people find that they have to spend a long time on the telephone, ringing up
people who owe them money because other business people are spending a long
time on the telephone ringing them saying, “Where’s my cheque? My
invoice is 60 days old and you haven’t paid it yet.”

The whole economy bogs down if there isn’t enough money in circulation.
Of course, if you are chasing money, you can’t spend as much as you’d
like; you can’t buy from a supplier until you’ve paid his previous
invoice. So this means that the amount of trading in the economy goes down and
so people don’t want to borrow because they’re not up to their limits.
Their business has excess capacity so the whole economy winds down.

This is in fact what’s happening around the globe at the moment. The
time will come in the United States and Canada very shortly when the only people
who want to borrow and the people who are desperate that they are being pushed
to pay their bills and the only place they could get the money is from the bank,
but because they’re desperate, the banks just won’t want to lend
to them.

And so the whole economy is very unstable. Every modern economy either booms
or it’s in bust. It’s either threatening inflation because so much
borrowing is going on or it’s winding down and the government is trying
to talk up the prospects so the people feel it’s safe to carry on borrowing.
It’s a very unstable system.

But there’s another major drawback to it, as well. If you create money
this way, through the banking system, money is created not when somebody gets
a loan, as lots of people who are interested in the money area think, it’s
when that loan is spent. The moment you write a cheque on your account, and
somebody accepts that cheque from you, both his account goes up and you go into
the loan facility that the bank has been given, that’s the moment when
the money’s been created. You, in fact, created it the moment you wrote
that cheque.

Now you have to pay interest, obviously, on that money. The old problem that
worried people for generations is where is the interest to come from? And it
means that more money has to be borrowed each year that was lent out the previous
one just to cover the interest that has to go back to the bank. This means that
the debt is going to tend to increase in the economy.

Now there are two ways that that can be handled. The economy could grow. That’s
alright, that’s great if it does, because it means that the debt to income
ratio throughout the economy can hopefully stay in balance. If you don’t
get growth, well, inflation is just as good, because that raises the level of
income in money terms. It’s money terms that you have to pay for debt
backing. So either growth or inflation, or a combination of the two, is necessary
in this system to prevent the debt growing and growing and growing, until, in
fact, it’s taking too much of people’s income, the burden of debt
becomes unsupportable and the system crashes and loans have to be written off.
That’s the ultimate bank policy mechanism.

And this is the great tragedy. This is the basic reason that I am interested
in money. We have a system which either has to grow or inflate to prevent the
economy collapsing. So if we are ever to build a sustainable world, a world
in which it is possible for rich countries, like Ireland, like Canada, like
the United States, to say we’ve grown enough, we’re already consuming
more than our fair share of our Earth’s resources, we must stop so that
resources can be freed up for countries where people genuinely have too little,
we don’t have to change the money system so that growth isn’t required
to keep money in circulation. This is the thing that creates an urgency for
money reform, both at the national and international level.

Q3. What are the origins of debt-based money?

Nobody ever designed the present money system, it's just one of those historical
disasters that happened.

The origins lie in the middle ages in Europe. If you’ve got gold in those
days, of course gold and silver were the currencies at the time, and if you’ve
got more gold in your possession or more silver than you’ve felt that
you could safely hide around the house, you took it to the only person in your
community who had a safe and that was your local goldsmith, your local jeweler,
and you would ask him if you could keep it in his safe and you got a receipt
for it of course.

Now people found that in fact the receipt was handier than the gold itself.
A receipt, a paper receipt, could be easily hidden just rolled up and put in
something, whereas gold was heavy and it chinked as you went along on your horse,
and it could easily be stolen, whereas a gold receipt it was more traceable,
if you lost the receipt and somebody else came for the gold, well at least that
could be stopped. So paper money, these receipts, in fact became a lot handier
than gold and this is the origin of the notes that we use.

But there was a backing, originally for every receipt there was gold in the
goldsmith’s vault, but then as time went on, some bright spark of a goldsmith
found that well there was an awful a lot of gold in his vaults that nobody ever
came for. He could in fact issue more receipts and charge people interest on
those receipts, so they could take the receipts away so they could spend them,
other people would give them value for them because nobody knew there wasn’t
genuinely any gold backing those receipts.

In fact the only time there would be any trouble is supposing the town was
being sacked by an invading army and just ahead of that people thinking that
the goldsmith would be overrun, went to his premises and asked for their gold,
so that they could flee, taking their gold with them. And of course in those
circumstances there just wouldn’t be enough gold in the vaults, and the
goldsmith would be exposed for the dishonest man he was. So that’s essentially
the system we’ve got today. There is nothing backing the money that we
use. The link between gold and the money we use has been gradually weakened
and weakened. Originally sterling notes, which still say on them I promise to
pay the bearer the sum of one pound, you could in fact go to the bank of England
with your note and get gold for it, you’d get a gold sovereign or something
like that.

But then Britain went off gold in the First World War, henceforth it was a
matter of honour to go back onto gold in the 1920’s. This caused a crisis,
it caused the general strike, and so Britain went off gold again, and at the
end of the Second World War, the Bretton-Woods Agreement set the course for
international currency dealings in the peace, and that established the gold
exchange standard, which meant that the dollar was exchangeable for gold at
a fixed rate, and everybody else’s currency was exchangeable for the dollar.

But then that ended in 1971, when president Nixon, to use his term 'closed
the gold window'. He, and pervious governments, had spent so much money, so
many dollars, in fighting the war in Vietnam, that the rest of the world knew
that there just wasn’t enough gold in Fort Knox to honor all the dollars
that were floating around the world and President De Gaulle started insisting
that French gold and dollars that the French held, be converted to gold, and
that gold be shipped back to France rather than staying in a bank in the United
States. And so there was a run on the bank essentially. The United States was
the 'world bank' in this stage, because it issued the world currency, the gold-backed
dollar, and so quite unilaterally, quite dishonestly President Nixon broke that
agreement, and ever since, there has been absolutely nothing backing our money.
That’s why there’s so much concentration on inflation these days,
you have to make people think their money is worth something, and so it mustn’t
lose its purchasing power too rapidly.

Q4. Can you tell us about a new system with four currency
types, and about some of the problems with LETS currency?

The ideas that I’ve put forward in my book 'The Ecology of Money' [describe]
four different currencies.

There would be an international currency, which I call the EBCU, or Emissions
Backed Currency Unit. There would be two national level or regional level currencies
- by regional I mean sub-national. Jane Jacobs suggests that every city region
needs its own currency, and in many cases the nation is too big, it's more than
a city region, and so maybe we should be getting away from national currencies
to regional ones.

So each region in fact ideally should have two currencies, one for buying and
selling, and the other would be a savings currency. It would be the currency
in which you kept your wealth, so the buying and selling currency would steadily
lose its value, and there would be plenty of it around. You would allow an inflation
to take place in that currency, and if you wished to save you would switch to
the savings currency, and then below that, each community would have one or
more currencies. These would need to be rather better than the LETS systems
that we use at the moment.

LETS in fact, although they’ve been very good in introducing people to
the idea of community currencies, they just don’t work particularly well.
A LETS system will run along quite well for about 2 years, and then it gets
into trouble. The reason that happens is this. LETS, which of course were developed
in Canada, by Michael Linton, are a debt-based currency. Yet people who are
in LETS systems just don’t like to talk about debt. They talk about going
into commitment, but they never specify what the commitment is. It’s a
commitment to the group, but when you go into commitment you are in fact going
into debt, you have got a deficit on your account and that debt is owed to the
rest of the group. But the whole weakness of a LETS system is that nobody ever
specifies how quickly you’re going to repay that debt back to the group
and nobody ever chases you.

This is one of the things that people who join the LETS system like, I mean
if they borrow from the bank in the real world, in the national currency, so
to speak, then the bank is going to chase them. The bank is going to set terms
- you have to repay that loan over 18 months and there will be so much interest
involved. You take a similar loan on in a LETS system, and nobody chases you.
It's wonderful. So you get two groups of people who join a LETS system when
it starts: one group are very gung-ho, very brilliant - will earn this money
and will spend it, they’re very enthusiastic, they rush around, they mend
each others' houses, paint them up, fix their cars, do their plumbing - they’re
wonderful people to have, and of course, they also work for the other group
in the system, who are very much more laid back, and this group goes further
and further into 'commitment', nobody really bothers about that, and so after
two years, you’ve got the very energetic people, who have got too much
credit in their account, and they’re beginning to think: I don’t
need any more of this money, you know I’ve spent all I can, I’ve
got other energetic people to help me and I’ve helped them - what I really
need is services from the group who has just drifted gently into debt, but they
can’t get off their arses to provide those services, and no, I’m
not going to bother accepting LETS currency anymore. And so the system loses
its most energetic members. It’s a sort of a perfect selection mechanism
for getting rid of the better people in it. And so a sort of malaise descends
upon the system, and the only people who are left in it, are people who really
can’t be bothered to put much effort in it at all.

So what a LETS system needs to work properly is a debt-chasing mechanism,
a debt enforcement mechanism, which of course the conventional system has. You
need to be doing something like charging people money and insisting they get
back into credit within a reasonable time to make a LETS systems work properly,
and unfortunately Michael Linton just fails to see this. In my last email exchange
with him, he in fact said, it's not the system that’s to blame, it’s
the people, and of course that is one way of looking at it. But he’s designed
a system to work with people, and it's got to take into account human nature,
and if it doesn’t take into account human nature, people will take as
much leeway as they will be allowed, then it's not a very well designed system.
So we need something better at the local level than that.

Q5. Can you explain the Ebcu and why the US dollar must
not be the new global currency?

So let me tell you about the way I see the world system operating.

There’s always a clash in the present economic system between the level
of activity in the economy and the environment, and there’s always a compromise,
that compromise always means taking more and more of the environment. What we
need is a money system that in fact protects the environment, that values, puts
a value on the scarcest resource, the one that is environmentally under the
most stress at the moment, and for me that’s the global atmosphere. I
mean we all know we are polluting the atmosphere by releasing greenhouse gasses,
that we need to cut these back by about 80% if we are to slow the pace of global
warming, and that if we don’t slow the pace of global warming by 2050,
the world’s forests will start to burn, the peat underneath those in Indonesia,
for example, will also burn; there will be a runaway warming, and there will
be a catastrophic climate change.

Yet we’re unable to respond to this within the present money system,
because, as I just explained [in #3], we have a money system that needs continual
economic growth. So that’s why we need to change the money system to something
that protects the environment.

So what I’ve proposed with the Emissions Backed Currency Unit, is a system
that has been developed by an English organization, the Global Commons Institute,
for which I’ve been economic advisor for the last eight or nine years.
Their system for controlling and reducing greenhouse gas emissions is called
'contraction and conversion', and under this approach, the nations of the world
decide what is the maximum concentration of greenhouse gasses that they dare
allow into the atmosphere. We are about 370 parts per million of carbon dioxide
at the moment, that’s a hundred parts per million more than it was before
the industrial revolution began. Now dare we go up to say 450 parts per million?
Are we going to get a catastrophic climate change before then? We’re already
noticing that storms are increasing that wind speeds are greater, that climate
patterns are changing. Will the Gulf Stream stop before we get to that level?
Nobody really knows, maybe we should stop at 400.

Anyway we set this limit. Once you’ve got the limit set, we know what
we’re emitting now, we know what fraction stays in the atmosphere, so
if we’re to hit that target we know the rate at which we’re going
to have to reduce global emissions year by year to hit that target. It probably
involves cutting emissions by about 5% a year. Now that would be fairly easy
at first because there’s a lot of fat in the economy. We’re using
energy in all sorts of wasteful ways, and by the time we’ve run through
the fat, then all sorts of renewable energy schemes would be coming on stream,
so 5% might just be an achievable target.

Okay so we’ve got an annual rate of reduction, for the sake of argument
5% of the world’s emissions. The big question next is how do you allocate
those emissions? Do you do what certainly the United States would like, and
in fact grandfather them, which means that everybody cuts back by 5% a year.
So the United States and Canada cut by 5% a year from where they are now, and
India and Nepal and places like that also cut back by 5% a year. And of course
that’s not going to be internationally acceptable, because the poor countries
are going to be able to use less energy than at the moment, and they’re
not the ones that cause the problem. So another approach would be to say ‘Well
let’s auction the permits, let’s have an international agency, perhaps
the United Nations sell the year's supply of permits and the money can used
for supporting the work of the international agencies around the world. It can
go to poverty alleviation around the world, and be spent particularly in the
poor countries. Of course that is a very top down approach, because it means
that international organizations are controlling how this money is spent. Worse
it means that the countries that have become rich by polluting the global atmosphere,
and therefore can pay more than the poorer countries can continue to use the
lion’s share of the global resource, the climate the atmosphere, so contraction
and conversion says, ‘look the only fair way of allocating this is to
regard the right to emit carbon dioxide and the other greenhouse gases as a
human right, that everybody’s entitled to the same allowance.

So we will issue permits to each country on the basis of their population,
and then countries that get too much - more of an allocation than they need,
which are the poorer countries, will be able to sell their allocation to the
richer ones, and this will do what is really necessary to alleviate poverty.
It will mean that a flow of real resources comes from the richer countries to
the poorer ones, so we have a system that binds everybody into the system. So
the currency that will used for this trading is the EBCU, the Emissions Backed
Currency Unit. Why? Well we can’t allow the United States to use the dollar,
or the Europeans to use the Euro, or the British to use Sterling, because these
are reserve currencies, and the United States has been grossly exploiting the
fact that the dollar is a reserve currency by spending dollars in the rest of
the world. At the moment only 2/3 of those dollars are in fact going back to
the United States, as demand for U.S. goods and services, the rest is lent back
to the United States. I mean, the Japanese have been running a huge trade surplus
with the United States for many years, and they’ve typically been buying
treasury bonds -they’ve been lending the money back to the United States,
and of course the United States has been paying interest on it, but the United
States has been paying interest in dollars and those dollars are added onto
the bill, so it's just more money that the outside world is lending to the United
States, there’s no real cost to the U.S. of borrowing that money. A cost
will only be incurred when people actually take those dollars, and say to the
Americans ‘we want goods and services for them, we’re owed all this
money we want you to deliver American goods and services for these, we’re
not prepared to be flobbed off with interest payments any longer’.

And this peculiar system, which has allowed the U.S. to build up a debt to
the rest of the world of 2,500 billion dollars, is the reason why the U.S. is
the world’s sole superpower. It’s why a country with 280 million
people outspends in armaments terms the next 20 biggest arms spending countries
put together, countries with a total population of 3.5 billion, it’s the
reason of course why the United States is in a position to attack Iraq at the
moment - without the power of the dollar, the United States military power wouldn’t
exist.

So this system of reserve currencies has given the United States an unfair
advantage over the rest of the world, and if that system continued and was used
to buy the emission rights from the poorer countries, and yet the reserve currency
still provided the world’s money, then in fact the rich countries would
be getting a discount. You could regard the United States at the moment as only
paying 2/3 the price for its imports, because it's being given back1/3 in the
cost as an interest free loan. That system can’t be allowed to continue,
so we do need a world currency that has a completely different base, that is
not issued as a result of debt, and is not issued by any of the national governments.

So my proposal for this is that an international agency issues the EBCU. And
on what basis should it issue it? Well again, why not on the basis of a country’s
population? That every country should get an allowance for every citizen that
it has, just as in a game of monopoly all the players start with an equal allocation
of money there at the beginning. So this new money would be given to the countries
of the world for them to start trading, and of course, the poor countries would
be able to use their allocation to get out of the debt crisis that many of them
are in, in fact if you’re creating money on the basis of debt then you’ve
got to expect some of that debt to end up in the weaker parts of the world.
It’s the weak who usually end up in debt, and so there will be less debt
in the new system anyway, because first of all we’re giving people essentially
a 'get out of debt free' card, by issuing the new money, and then of course
these poor countries are going to get an annual allocation of emission rights,
and they’re going to be able to sell a proportion of these. It's almost
as if they’re starting growing a new crop, which they’re going to
be able to sell every year. So we get a better balance between rich and poor
in the world anyway.

Now the value of the new currency would be fixed in terms of the emissions
rights, so the international agency that would issue the currency would also
issue the emission rights on a declining basis each year. Each year there would
be 5% fewer emission rights allocated than the year, before so that you can
be sure you’re going to hit the target, and the issuing agency would say
‘well if ever the price of the emission rights rises above a certain level
we will supply supply more of them, but we’ll take the EBCU you’ve
used to pay for them, and we will destroy those EBCU, in other words we’re
going to reduce the amount of global money in circulation.’

Now this means that less trading is going to be possible at a world level,
so that’s immediately going to cut back energy demand. It doesn’t
mean that any particular country suffers because of this, [becasue] if any country
can in fact cut their energy consumption, then they can build their economy,
they can get a higher level of income. So the onus is on individual countries
and individual regions to move as rapidly as possible away from fossil fuels,
because that either means they’re going to have more permits to sell or
emission rights to sell, or less emission right to buy, so by doing this the
whole direction of the world economy begins to change. Instead of always putting
pressure on the environment, because of the need to expand, now the pressure
is, well to take pressure off the environment, to cut back fossil fuel consumption,
because the faster you do that the better living standards you can achieve.

So that is the proposal. It is being researched at the moment. We’re
building an economic model to show how it would work. We don’t expect
the United States (or indeed Canada, because of the long border) would ever
wish to join such a system, and certainly the United States would never come
in, because it would mean that it had to make very rapid reductions in its use
of fossil fuels, and it would lose the power of the dollar. So we’re assuming
in our model that all the EU countries including the ten that are about to join
would participate in this system, along with their former colonial territories.
So you’ve got some over consumers of fossil energy and you’ve got
a lot of 'under-consumers', places like Indonesia, India, Africa and these countries
generally have strong links of friendship still, and so the fact that real resources
were going from say Britain to India, because the British were having to buy
emission rights to continue to use as much energy rights as they do, this would
in fact be good, because the EBCUs that go to India would in fact come back
to Europe as demand for European goods, and of course it would be good for the
Indians, because they would be able to lift their people out of poverty.

So that’s the scheme. What we hope to do is to get it in a form that
begins to attract people's notice, that begins to get people excited by it.
We can’t work out the details fully - all we want to do is show that it
has a plausible promise so that people take it up and investigate it further
and it begins to build a degree of support behind it, so that it is considered
by the commonwealth governments as a runner. ‘Let’s investigate
this further, it seems to be the best way out of the problem’, because
if we don’t adopt such a system, then there is always going to be this
perpetual struggle between the need for economic growth and the need to protect
the environment. Whereas by having this system we’ve incorporated one
with the other, and the real resource, when you were saving EBCUs you would
be taking pressure off the planet. Whereas under the present system, when you
save money, you leave it in the bank [and] it just gets recycled to somebody
else, so you’re not taking any demand off, and if you just take the money
and you put it under the mattress, and people stop spending generally, hoarding
takes place. Well, what you’re doing, you’re just putting somebody
out of work.

Q6. How will the Ebcu be allocated?

A lot of the calculations in the climate world are based on 1990. For example,
under the Kyoto agreement, countries are meant to reduce their emissions to
a certain percentage below the 1990 levels by 2010, and so why not take a base
year for population too? And say you get an allowance based on your population
in 1990. Now some countries would say that’s unfair, we have a very young
population. Despite our best efforts, because of the age profile it is going
to grow. And that’s a fair argument, so something would have to be done
to accommodate that, but you wouldn’t make it open ended. Each country
would maybe have a maximum allowance, that it could get, because it would be
given a target for its maximum population, and that would be the maximum that
it was ever paid in either, well in the emission rights of course, the issue
of the currency only takes place in year one, and so you get an allowance for
each member of your population at that time. There’s no further issues
ever.

Honestly there’d be some horse-trading in there. You need to allow politicians
in the room. Every political leader needs to come back from negotiations and
say, 'I did this - I managed to get this concession, it's okay now'.

Q7. How can the Ebcu system be started?

It’s essential that we have a scheme that is amenable to and part of
a world solution.

For example the European Community didn’t begin with 15 members, it started
out as the Iron and Steel Community with 2 or 3, then it went to six and so
on. So it is necessary to find some way of introducing this system without having
to get international agreement, otherwise you’re always going to have
somebody like the OPEC countries or the United States - and Canada’s record
hasn’t been particularly good, neither has Australia’s in climate
negotiations - standing in the way.

So we have to start somewhere, but it has to be with a sub-world group rather
than an all world group. Now the circumstances in which you might start I think
are arising. You’re not going to find politicians accepting it in current
circumstances, but if the depression that’s developing at the moment,
becomes as serious as I expect it to be, because … situation at the moment
is that globalization has managed to synchronize the economies of the world
so that they’re all going down together, and it’s going to be very
difficult, if not impossible, for them to climb out of that mess, then the best
way to climb out of the mess is not to try and adopt, say Keynesian methods
on a worldwide scale and put spending power back in the economy to the point
that the car factories are working to capacity again and that GM wants to expand
and that all the economic workings are restored to their present level, that
would be an extraordinarily wasted opportunity.

What we could persuade people to do, I think, in those circumstances, is that
this is the way out of the situation: let’s instead of retaining a debt-based
money system, let’s have a world money that is given into circulation
in the way that I outlined, and let’s think of how we might change national
currencies too get them away from being debt based as well. Let’s have
governments spend money into circulation so that it’s always there, and
it doesn’t disappear if people don’t wish to borrow - if they don’t
have the confidence tomorrow.

So I think in a crisis - I fervently believe a crisis is coming - we are going
to get the chance to do a lot of things which people, politicians just wouldn’t
have the guts to in normal circumstances. So that’s our chance. I think
we are going to be presented with the opportunity to make a dash for sustainability,
and its going to be humanity’s last chance, because we’ve just about
consumed half the world’s total endowment of oil, and this is what Iraq
is all about. Global oil output is going to peak at about 2005-2008. 70% of
the remaining oil is either in the Middle East or in a Caspian basin. Global
gas production will peak at around 2020 and then fall off very rapidly. If you
put the figures together you’ll see there’s only about 12 years
in which the total energy available from oil and gas is going to continue increasing.
Then the world’s economy starts contracting because the way we’ve
been expanding the world economy has of course been to use more and more fossil
energy year after year. This road won’t be open to us, so we do need to
change anyway.

We’re going to have to make massive investments in order to build a low
energy economy, an economy that is dependent on renewables, and this means there
are a lot of new opportunities there. We don’t have to get the existing
factories back up to capacity, so that growth of the old line can start again.
In the 1930’s the only thing that ended the Depression then was the war
in 1939. This created a whole new range of products; planes, tanks, guns, bombs,
and so on that needed to built and so it brought investment forward. Previously
there hadn’t been the things that … I mean people wanted things,
but they didn’t have the money to buy them. So only new products, for
example the Hoover company built a vacuum cleaner company in London at the time,
car production was expanding, but everything else was dead. It was only new
products where there were opportunities. We don’t want to produce the
demand to get a depressed global economy going by having another war this time,
what we need to do is use that twelve years of energy that we’ve got left
to make the investment in all the systems that we’re going to need to
move over to a renewable-powered economy - the wind turbines the photo-voltaic
panels, the marine turbines, wave powered systems, biomass, and so on, different
systems of transportation, so that we can live reasonably, at much lower levels
of energy consumption.

So we have to do this thing for two reasons: it’s not just because of
climate change, it’s because fossil fuel is running out, at least the
two key fossil fuels, oil and gas, are running out. There’s a lot of coal,
there’s five times as much coal as there is oil or gas left at least.
Coal can be converted into an oil substitute - the Chinese have just bought
a big plant from Britain to do that - but coal is a dirty fuel, there’s
a lot more carbon in it, and if we carry on with our present path of energy
expenditure and use coal instead, then there is just no hope of saving the climate.

So we are at a turning point, and I think the coming depression will present
us with an opportunity and we can save ourselves. I don’t rate the chances
of our doing so very highly, unless of course a lot of people get behind these
ideas and convince their politicians that this is the way out of the crisis.
That it is the only way they can kill several birds with one stone, to use a
very un-environmental metaphor, to save the planet and enable people to live
in future at a reasonable level.

Q8. What will help relocalisation to happen?

Of course I’m entirely in favor of localization and my book Short Circuit
was entirely about the methods that are available to communities to protect
themselves from the world economy and to do more things within their own areas
than would be possible if world prices and interest rates and so on had uncontested
rule there.

So I’m in favor of that but I think that localization is going to happen
anyway for this reason that the global economy depends on cheap fuel particularly
for transportation.

Now the main transportation fuel is of course oil, but if the age of cheap
oil is pretty well over, then we’re not going to be able to move bulk
commodities around the world quite as cheaply as we have been doing, particularly
those time-sensitive ones that have to be flown, they’re going to get
very expensive indeed.

So this is going to give the price signals for a re-localization, and I think
market mechanisms will begin to force it along.

Q9. Can the American war machine be stopped?

It’s difficult to know the way things will go. The rest of the world
has a lot of power over the United States. If it realized it did. If everybody
realized that by accepting American dollars or by holding American assets you
were in fact aiding and abetting the United States, [then] the best way to stop
this war is in fact to do what the Americans did to Britain at the time of the
Suez crisis, I mean they threatened to pull the plug on the pound.

If the rest of the world pulls the plug on the dollar at the moment by selling
dollars, selling dollar assets, then the United States would lose its power.
It has only got its power because we’ve been happy to supply it with our
goods and services and take payment in dollars, which we haven’t spent.
We’ve just lent back and taken interest payments in dollars. The rest
of the world can stop the United States.

Now what happens though, when people take their dollars and tell the Americans
‘we don’t want to sell to you in dollars anymore, we’ve already
got too many dollars, you’ll have to pay for our goods in our own currency
in future’. This would mean of course that the United States dollar would
crash in value, it would do so anyway if people move. . . in fact its happening
at the moment as people move out of dollars and into currencies like the Euro.
The Euro is climbing very strongly against the dollar.

So the dollar will fall in value, people are projecting by at least 25%. Now
this means that the Americans are going to become poor, that they are not going
to be able to afford to buy in oil - they’re buying 60% of their oil at
the moment on world markets - on anything like the scale that they are doing
at the moment. The Americans face a real crisis, and I think this does explain
quite a lot of what’s going on in relation to Iraq at the moment.

Q10. Should federal and local currencies be exchangeable?

It’s impossible to keep local currencies and national currencies apart.
You’re buying and selling the same things in both currencies, so people
know the value of say the LETS unit, and they know in terms of what it will
buy, and they know the value of the national unit in terms of what it will buy,
so there is an exchange rate there anyway, and you might say to people “It’s
against the rules to trade, to swap one currency for another”, but you’re
not going to stop it, so you’ve got to accept that it is going to happen.

In fact people are always going to prefer to get the national unit. You’re
kidding yourself if you think that your local unit, your green dollar, is in
fact worth a dollar, because it’s not. People would always prefer to get
a genuine dollar, a national dollar, because that can be spent in so many different
way, whereas the local unit the green dollar can only be spent amongst a very
small group of people, but you’ve got to accept that there is an exchange
rate and people will exchange.

Q11. Should Everything be Produced Locally?

I can’t think that anybody thinks that it is desirable or possible to
produce absolutely everything that a modern community needs within its home
limits.

What I urge in “Short Circuits” & in my other writings, is
that each community should try and produce the essentials of life within its
own area so that it doesn’t get caught. For example, if you are dependent
on the outside world for your energy supplies, your systems just don’t
work without it, your factories can’t work, your farmers can’t plant
fields and so on, then you really are caught.

You’ve got to sell those things that you can produce in your community
at whatever terms the outside world will offer in order to buy energy from the
outside world at whatever price the outside world chooses to ask. So you can’t
be self reliant on that basis. You can get very badly caught, you can be exploited.

So the first target that every community should aim for is self-reliance in
energy. The next one is food. Become self-reliant in food, then after that it
doesn’t really matter too much. Take it a little bit further to say, housing
materials, but what that means is supposing you have a bad year - supposing
that the price for whatever commodities the community is selling to the outside
world falls because of some external crisis, it means that the life of the community
has to go on. That you’re not exchanging your apples for oranges this
year - now that’s a pity, but there we are. You’re not exchanging
the industrial boot that you're making for money which enables you to buy dancing
shoes or something like this. It’s a pity, but it’s not vital.

So each community should try and put a protective barrier around itself and
produce within its own boundaries the essentials of life. And of course, it’s
up to each community to decide what how far it should go.

Q12. How do you leave LETS system (or move to another)?

I think if you’re talking about when a person leaves one LETS system,
they should certainly clear their account. Some systems might allow them to
do so in the national currency, in other systems you would have to sell something
which is always easy when you’re going away. I think if that’s what
the question means, I think the answer is really self-evident.

Q13. Should LETS charge for their services?

I feel very strongly that LETS systems have failed to charge enough for their
services. They’ve never had the confidence, and they’re probably
quite right that they’re not offering something which is of enough value
to make people want to join. Its very expensive to run any LETS system. This
is one of the drawbacks of LETS that there’s an awful lot of paperwork
in getting and keeping a system like that running. In some systems, in England
roughly a third of all the transactions are entailed by the expenses of keeping
the system running, so you’ve got to charge.

The conventional banking system charges. You pay so much for every cheque and
so on. Why should a LETS system, which is modeled too closely in my view on
the conventional money system, be any different? What happened in Argentina
is very instructive: the LETS systems there were totally overwhelmed when the
economy began to decline and people began to depend on them for the essentials
of life in many cases. It just wasn’t possible to keep records of every
transaction, so what they did, they scrapped all that. Everybody who joined
the system got 50 creditos, which was worth 50 pesos, which was worth at that
time 50 U.S. dollars, and told ‘go away that’s it - trade with those,
you won’t get any more. If you want to continue trading, well that’s
your maximum credit and you’re going to have to sell your goods and services
to earn any more’. That worked reasonably well for a time, it certainly
allowed a big expansion of their activities.

We don’t have time now to go into what happened subsequently in Argentina,
but I don’t think a LETS-based system is going to be any good in the sort
of crisis that I’m anticipating.